Page 164 - Midas Touch

acknowledge it exists and is thriving, and to advise you to avoid it if you
want the Midas Touch.

From E to S

Employees do not need to keep records and pay taxes. The company they
work for does that for them. If they do prepare taxes, it is primarily for a
tax refund. Employees do not need a CPA or tax attorney because there is
little these professionals can do for an employee. There are very few tax
breaks for employees. To make matters worse, the more money an
employee makes, the more taxes they pay.

It is this lack of knowledge about taxes and records that gets even honest
entrepreneurs in trouble. When a person moves from the E quadrant into
the S quadrant, they run into a flurry of taxes and government regulations
few employees know about. This is why relationships with professionals
like accountants and tax advisors are so important.

Entrepreneurs face additional taxes such as:

Sales tax
Self-employment tax

FICA (Federal Income Compensation Act, aka Social

Security and Medicare)
State unemployment tax

Federal unemployment tax

Other taxes and regulations

We can better understand the problem with taxes using the example of a

kid earning $10. An employee in the E quadrant earning $10 will pay
approximately 30 percent in taxes, netting seven dollars.

A self-employed person in the S quadrant earning $10 will pay
approximately 60 percent in taxes, netting four dollars. This is why most
small entrepreneurs simply put the $10 in their pocket, becoming tax
cheats and criminals. This is what many investors are afraid of.